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    Certificate of Deposit

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    Vinesh Kumar
    Certificate of deposits are short term deposit instruments issued by banks and financial institutions to raise large sums of money. They are negotiable and can be traded in the secondary market before maturity. Certificate of deposits are issued for a specified period of time and interest rate. They can be sold to other parties and traded in amounts ranging from 5 lakhs to 1 crore rupees in India. The Reserve Bank of India introduced guidelines for banks to issue certificate of deposits in 1989 based on recommendations from the Vaghul committee to develop the money market.

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    Certificate of Deposit

    Uploaded by

    Vinesh Kumar
    72 views1 page
    Certificate of deposits are short term deposit instruments issued by banks and financial institutions to raise large sums of money. They are negotiable and can be traded in the secondary market before maturity. Certificate of deposits are issued for a specified period of time and interest rate. They can be sold to other parties and traded in amounts ranging from 5 lakhs to 1 crore rupees in India. The Reserve Bank of India introduced guidelines for banks to issue certificate of deposits in 1989 based on recommendations from the Vaghul committee to develop the money market.

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    Certificate of deposit

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    Certificate of deposits are short term deposit instruments issued by banks and financial institutions to raise large sums of money. They are negotiable and can be traded in the secondary market before maturity. Certificate of deposits are issued for a specified period of time and interest rate. They can be sold to other parties and traded in amounts ranging from 5 lakhs to 1 crore rupees in India. The Reserve Bank of India introduced guidelines for banks to issue certificate of deposits in 1989 based on recommendations from the Vaghul committee to develop the money market.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    72 views1 page

    Certificate of Deposit

    Uploaded by

    Vinesh Kumar
    Certificate of deposits are short term deposit instruments issued by banks and financial institutions to raise large sums of money. They are negotiable and can be traded in the secondary market before maturity. Certificate of deposits are issued for a specified period of time and interest rate. They can be sold to other parties and traded in amounts ranging from 5 lakhs to 1 crore rupees in India. The Reserve Bank of India introduced guidelines for banks to issue certificate of deposits in 1989 based on recommendations from the Vaghul committee to develop the money market.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    Certificate of deposit

    Certificate of deposits are short term deposit instruments issued banks and financial institutions to
    raise large sums of money.

    Certificate deposit are issued in the form of usance promissory notes. They are negotiable and are in
    marketable form bearing specific face value and maturity the CD are the transfer from one party to
    another. Due to their negotiable nature, they are also known as negotiable certificate of deposit.

    These a marketable receipts in bearer form for funds deposited in a bank for a specified period of
    time and at a specified rate of interest. It is a form of fixed deposit which is transferable in nature. It
    can be sold to someone and can be traded in the secondary market. A certificate of deposit can be
    issued for a minimum amount of Rs. 5lakhs upto Rs. 1 crore in India.

    Features of certificate of deposit

    1. Document of title to time deposit


    2. Unsecured negotiable pronotes
    3. Freely transferable by endorsement and delivery
    4. Issued at discount to face value
    5. Repayable on a fixed date without grace days.
    6. Subject to stamp duty like the Usance promissory notes.

    Introduction of certificate deposit

    The banks in the USA in 1960s introduced CDs which are freely negotiable and marketable any time
    before maturity. The CDs were issued by big bank in the USA in units of $1 million at face value
    bearing fixed interest fixed with a maturity generally ranging from 1 to 6 months. Banks sold CDs
    direct to investors or through dealers who subsequently traded this instrument in secondary market.
    The American banks issued for the first time dollar CDs in London in 1966. The bank of England gave
    permission to around 40 banks to make CD issue.

    The feasibility of introducing CDS in India was examined by the Tambe working group in 1982 which
    did not, however, favour the introduction of this instrument. The matter was again studied in 1987
    by vaghul working group on the money market. The vaghul group recognised that commercial paper
    would be attractive both to the banker and investor in that the bank is not required to encash the
    deposit prematurely while the investor can liquefy the instrument before its maturity in the
    secondary market.

    On the recommedations of the Vaghul committee, the RBI formulated a scheme in june 1989
    permitting scheduled commercial banks to issue CDs, in terms of the scheme , CDs can be issued
    scheduled commercial banks at a discount on face value and the discount rates are market
    determined. The RBI has issued detailed guidelines for the issue of CDs and with the changes
    introduced subsequently, the scheme for CDs has been liberalised.

    RBI GUIDELINES

    1. The denominations of CDs could be in multiples of Rs. 5 lakh subject to a minimum size of an
    issue to a single

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